Journal of Business and Economics, ISSN 2155-7950, USA August 2013, Volume 4, No. 8, pp. 695-707 Academic Star Publishing Company, 2013 http://www.academicstar.us An Exploratory Study on Private Label Brand Knowledge and Consumer Loyalty Ching-Wei Ho (Department of Marketing, Feng Chia University, Taichung, Taiwan) Abstract: The objective of this research is to assess the relationship between retail private label brand knowledge and loyalty in Taiwan. A questionnaire survey is conducted among 529 customers in Taiwan as the research design. The results of this study indicated that retail PLB awareness and retail PLB image both have a positive effect on consumer retail PLB loyalty. The research finding is one of the first to demonstrate that retail PLB knowledge affect consumer loyalty positively in Taiwan through examining PLB food and non-food products. Retail PLB knowledge must be considered as a ‘whole package’ for developing services marketing effectively. Key words: private label brand; brand knowledge; brand loyalty; survey, Taiwan JEL code: M310 1. Introduction The topic of retail brands has been discussed and investigated a great deal by previous researchers and scholars (e.g., Aaker, 1996a; Ailawadi and Keller, 2004; de Chernatony and McDonald, 1998; Gordon, 1994; Kapferer, 1997; McGoldrick, 2002; Randall, 2000; Wileman and Jary, 1997) and the concept of retail brands has been recognised and argued since the 1960’s (McGoldrick, 2002). With the growth of retailer brands over the past 25 years, particular in Europe, the evolution of these product ranges has started with private labels offering the consumers a lower quality product alternative for lower prices, into retail brands offering a true quality brand alternative (Burt, 2000). Meanwhile, compared with the mature European retailing market, the concept of retail brands in Asia has just started from the beginning stage and more and more Western retail companies go global and enter into the Asian market with their successful operation experiences. According to Au-Yeung and Lu (2009), many international retailers believe that use of own label brand in Taiwan is important. However, an understanding of the development and strategic use of own label brand by retailers in Taiwan is not yet well established. Burt (2000) pointed out that not all countries’ or companies’ private label brands progress through the same sequence as the development of retailer brands. Current research from the US indicated that consumers are considering purchasing a greater proportion of retail private label brands, e.g., in 2008, 24% of foods and drinks were got from private label brand products in American families, and 97% of American families bought private label brand products (Su, 2009). In Taiwan, retail branding has been introduced for over one decade (since about 1998 and 2000) by international retail brands, e.g., Carrefour, COSTCO and TESCO (Ho, 2008). Since then they started creating and promoting low-priced private label brand products as the first stage for developing retail Ching-Wei Ho, Ph.D., Feng Chia University; research areas: marketing, retailing, branding. E-mail: [email protected]. 695 An Exploratory Study on Private Label Brand Knowledge and Consumer Loyalty branding in Taiwan. The research finding from Au-Yeung and Lu (2009) summarized that the developing progress of retail own label brand products in Taiwan does not follow the pattern witnessed in the West. According to Ho, Vignali & Temperley’s research (2006), at the beginning few years Taiwan’s retail private label brand still stayed at the introduction stage, but in recent years, it is forecasted to have a growth trend (Carat Media Weekly, 2008). It has been believed that more and more Taiwanese consumers have started to know, accept and use retail private label brands. The key issue therefore is whether the more retail brand knowledge consumers acquire, the more retail brand loyalty they have. It is an interesting issue to observe and explore after a decade into retail brand development in Taiwan. Therefore, this research paper is going to explore consumers’ retail private label brand knowledge which is adopted from Keller’s brand knowledge concept (1993) to examine whether consumers’ retail private label brand knowledge affect their retail private label brand loyalty. The previous discussions about the relationship between brand knowledge and brand loyalty are mainly for the manufacturer brand or in general (Peng, 2006), less for the field of service or retail branding specifically, thus this research will investigate a proposed conceptual research framework for the relationship between retail private label brand knowledge and retail private label brand loyalty. 2. Background to Retail Private Label Brand in Taiwan Taiwan is one of the newly industrialized economies and its retail industry is currently in a very strong competitive phase. Taiwan’s modern retail market started from the first 7-Eleven in 1979 and then the first international chain warehouse, Makro, from Dutch in 1987 and the last three decades have seen rapid growth of chain system (McDonnell et al., 2011). The development and density of hypermarkets in Taiwan (per 229 thousand people have one hypermarket) leads throughout Asia Pacific (ACNielsen, 2004; Retail News, 2004). With regard to retail private label brands in Taiwan, which were launched from 1979 by 7-Eleven, but late to 1995 they started to be used in hypermarkets by Carrefour Taiwan. At the beginning, private label brands only had non-foods commodity products (e.g., commodity products) and did not get consumers’ attention. 76% of Taiwanese consumers said, “I don’t know these private label brands so I don’t want to have a try.” (ACNielsen, 2005). According to Ho, Vignali and Temperley’s research (2006), the first few years (till 2005) still stayed at the introduction stage. At that stage, all products no matter foods or non-foods which were higher price-sensitive and lower preference had potentiality to develop as private label brands, and private label brands did not have any brand value. Every retailer just operated private label brands with low price strategy (Wang, 2005). According to Wang and Lu (2005), the private label brand share was under-developed with only 2.1 percent market shares in Taiwan, but the growth rate was 30 percent. Figure 1 illustrates that global private label brand share is 17 percent and average retailer concentration is 60 percent. The UK and Switzerland was at the position of over both average levels where is the well-developed private label brand market. In the grey zone, e.g., New Zealand and Australia, it is the highest potential market for private label brand growth. Though Taiwan was in the under-developed marketplace, it was moving toward to grey zone by increasing retailer concentration. Until 2009, both quantity and quality of private label brand products had a big growth trend. For the quantity, Carrefour’s private label brand products accounted 10% for total sales in 2007 and aimed to up to 17%-20%; RT-Mart’s private label brand products also had 10% of annual sales; COSTCO’s “KIRKLAND” achieved 20% of annual sales (Carat Media Weekly, 2008). For the quality, both Carrefour and RT-Mart created the second private label brand label to claim that the products under this label are provided with the same good quality as national 696 An Exploratory Study on Private Label Brand Knowledge and Consumer Loyalty brand products (Card U News, 2009). Since then, brand value for private label brand products was concerned as a key issue for both retail players and Taiwanese consumers. Average Retailer OB Share Concentration 60% 60% Switzerland 40% Global OB UK share 17% 20% US New Zealand Japan TAIWAN Australia Retailer Concentration 20% 40% 60% Highest Potential for OB Growth Figure 1 Private Label Brand (OB) Shares and Retailer Concentration Source: Wang and Lu (2005) Meanwhile, in recent years, Taiwanese consumers have started to know, accept and use retail private label brand. After observing Taiwanese consumers’ private label brand shopping behavior, Peng (2011) concluded that nowadays when making a buying decision, more and more consumers have considered the knowledge and value about retail private label brands not just the price issue. Furthermore, it could be found that private label brand loyalty for Taiwanese consumers was developed during these years, e.g., there were 90% of Carrefour’s consumers realized to buy private label brand and have high repurchase rate, according to PR Manager of Carrefour Taiwan, Lin (Card U News, 2009). Moreover, for the development of own label brand product categories, it also had a change. At the introduction stage (before 2005), the developing strategies of private label brand more focused on non-foods products, such as commodity products (e.g., toilet paper) than foods product, i.e. fresh foods, such as meat, vegetable and fruits, and frozen foods (Wang, 2004). Actually, at the first few years, non-foods products particularly paper products and plastic goods were the most popular private label brand products for consumers, but from 2005 AC Nielsen report, foods products, e.g., milk, cheese and ready-to-eat products, had 32% market shares with 9% growth rate, which means that foods products replaced non-foods products to be the most accepted private label brand products (Ho, 2007). 3. Literature on Retail Private Label Brand There are many different definitions of retail private label brands (own-label brands, private labels, or own 697 An Exploratory Study on Private Label Brand Knowledge and Consumer Loyalty brands), Brassington and Pettitt (2003, p. 1106) defined as “branding applied to goods that are produced by a manufacturer on behalf of a retailer or wholesaler who owns the rights to the brand.” Meanwhile, Rousell and White (1970) pointed out the feature of “exclusively” for private label brands and indicated that products sold under a retail organization’s house brand name, which are sold exclusively through that retail organization’s outlets.